For more than four decades after India’s independence in 1947, the state occupied the commanding heights of the economy. Under the direction of the ruling Congress party, it dominated areas such as power, steel, mining, transport and communications. Private businesses were allowed access to the consumer goods sector but even here their activities were strictly regulated, the state determining where a new unit could be opened, how much it could produce, and what it should pay its labour force. And foreign investment was verboten.

The scholar-statesman C Rajagopalachari coined a striking phrase in 1959 to describe the government’s close, almost obsessive, control over productive activities. He called it the “license-permit-quota Raj”. Rajagopalachari formed a new party, Swatantra, committed to free-market principles. It enjoyed modest success at the polls, and died a quiet death in 1974. But 17 years later, Swatantra achieved a sort of posthumous vindication when a Congress government led by prime minister PV Narasimha Rao began the process of dismantling the system of state controls. The economy was now to be liberalised, and even foreign capital was to be welcomed in.

It was as this was unfolding, in 1995, that Jean Drèze and Amartya Sen published India: Economic Development and Social Opportunity. Drèze and Sen – the latter of whom would win the Nobel Prize in Economics three years later – argued that in a deeply hierarchical society, the state still had a critical role to play in equalising life chances. While they allowed that the public sector must get out of running hotels and baking bread, they insisted that it become stronger in areas such as health and education. Only well-run state schools and hospitals could create conditions whereby low castes, women and minorities could compete on something like equal terms with those from more privileged backgrounds.

IN Essay

Liberalisation, meanwhile, was making its own case. There was a sudden surge in growth rates, now 5-9 per cent a year rather than 2-3 per cent, as was previously the case. Sectors such as information technology boomed. A country once starved of foreign exchange was swimming in it. The best (or, at least, most expensive) western brands were visible for the first time in Indian stores. The country now had its first malls, its first multiplexes, even its first Formula One racing track.

This economic growth led to a rise in the number of Indians in the Forbes billionaires list, and also to an expanding middle class. Several hundred million Indians had some share in this new-found prosperity. But many more Indians remained desperately poor. As the economist TN Srinivasan pointed out: “If one is poor in India ... one is more likely to live in rural areas, more likely to be a member of the Scheduled Caste or Tribe or other socially discriminated group, more likely to be malnourished, sick and in poor health, more likely to be illiterate or poorly educated and with low skills, more likely to live in certain states (such as ... Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh, and also Orissa) than in others ...”

How should public policy address this persistence of mass poverty despite the overall growth of the economy? This question has prompted different answers. One, associated with the unreconstructed Marxist left, argues that the process of liberalisation must be reversed and that the state reclaim ownership of the economy. High rates of taxation, expropriation of large holdings, nationalisation of large companies – these are the means advanced to redistribute wealth to the backward regions and poorer parts of the population.

A second perspective, radically opposed to the first, is to allow the market freer play still. For example, conditions of hiring and firing, and the level of wages, remain under close state supervision. The disposal of land (a resource critical to industrialisation) remains under the purview of the state. If labour laws were liberalised, and companies allowed to buy land directly from peasants at the prevailing market rate, then – so this argument runs – more jobs and more wealth would be created.

Some at least of these market-minded economists are aware of the problems of endemic poverty. But, they claim, here too the market could be used more imaginatively. Rather than allow a malfunctioning state to run schools and hospitals, or provide subsidised food, the needs of the poor could be more directly addressed by cash transfers and a system of vouchers. This would free poorer families from crippling dependence on a corrupt and incompetent bureaucracy.

The third perspective, of which Sen and Drèze have been the most influential advocates, calls for a welfare-minded state to moderate the excesses of the market. This argument is restated in their new book An Uncertain Glory, in elegant and restrained prose and with an array of fresh examples. Looking beyond growth rates, whether aggregate or per capita, they flag other relevant statistics showing stagnant real wage rates, high levels of malnutrition, falling gender ratios and shockingly inadequate sanitation.

This analysis of inequality is made more wide-ranging by an excellent analysis of the limitations of the Indian media. Sen and Drèze excoriate the Indian press for “its partiality in favour of the rich and the powerful”. The fact that newspapers and magazines are kept afloat by large corporations “creates a general tendency to pander to corporate culture and values”. Further, there are “strong pressures on the journalists and editors in a corporate-sponsored world to be selective in what they say or write”.

The twin foci of the Indian media today are the minutiae of party politics and the worship of wealth and celebrity. Billionaires, fashion models, sports stars and film stars occupy a disproportionate amount of space in print and on television. By contrast, health-related issues account for less than 1 per cent of the editorial space in Indian newspapers. This “inequality of articulation and attention”, write Sen and Drèze, “makes an overwhelming disparity in the lives of people both less discussed and correspondingly more resilient and stable”.

There remain pervasive inequalities of caste, class, region and gender, even if the press and public discourse don’t often pay attention to them. It is thus that, in contrast to those who call for a minimalist role for the state, Drèze and Sen believe that “in India public services call for far-reaching expansion”. There has, they note, been “a resounding failure to harness the constructive role of the state for growth and development” – by, for example, creating equal access to health and education, and protecting the environment from marauding miners and polluting factories.

Sen and Drèze energetically make the case for a more activist state. But – to this reader at any rate – their prescriptions seem too generalised, exhortations rather than operable instructions. They write – contra the claim that a greater role for the state means more corruption – that “most of the countries rated ‘least corrupt’ in international comparisons, such as Sweden, Denmark, Canada and Singapore, have a significantly larger public sector as a proportion of the economy than India has”. But why are these countries less corrupt? Does India currently have the institutional capacity to replicate the western European experience in the efficient delivery of public services?

That, surely, is the key question. It is true, there remain some well-functioning public institutions and some outstanding public servants in India. The delivery of social services is reasonably efficient in three out of 28 states of the Republic. On the whole, though, the country is akin not to Sweden or Canada but to Argentina, of which Jorge Luis Borges once wrote: “The state is impersonal; the Argentine can only conceive of personal relations. Therefore, to him, robbing public funds is not a crime. I am noting a fact; I am not justifying or excusing it.”

A key contributing factor to the declining capacity of public institutions – largely ignored by Drèze and Sen – is the functioning of parties and politicians. In Jawaharlal Nehru’s day, the civil services were insulated from political interference. Now, however, politicians have captured control of two aspects of institutional functioning – procurement and postings. The choice of contractors and service providers for welfare schemes, as well as the allocation of important jobs, is increasingly determined by legislators and ministers, rather than by impersonal criteria of competence or merit. Sometimes, the choice is based on personal proximity; at other times, on a monetary transaction. And a person who has paid to get a job or a contract is likely to focus on recovering his investment rather than on the prompt or efficient delivery of services.

The malaise in public services is not universal. Indian Railways, for example, has manifestly improved the availability of tickets in recent years, mainly by introducing online booking. The wider and more focused use of electronic technologies may limit leakages in other areas. But a bolder, braver, political leadership must play its part as well. Here, historians (as well as citizens) may well come to regard Manmohan Singh’s two terms as prime minister as wasted years. Despite being an experienced administrator himself, he has done nothing to arrest the decline in public institutions, even as his own cabinet ministers are implicated in scams and scandals that run into billions of dollars.

Not all of those who advocate market solutions for addressing deprivation in India today are market fundamentalists. Rather, seeing the current condition of the Indian state, they despair of what might happen if it acquires even more power and (ir)responsibility. The insulation of postings and procurement from politicians; the lateral entry of qualified professionals into a civil service dominated by an antiquated cadre of generalists; punitive action against corrupt officials and ministers (and against lazy schoolteachers too); the promotion of internal democracy in parties that are now family firms; changes in the electoral law to make funding more transparent – as and when these institutional reforms take shape, the case for welfarism will look more robust than it presently does.

Ramachandra Guha is author of ‘India After Gandhi: The History of the World’s Largest Democracy’ (Pan). His ‘Gandhi Before India’ will be published by Penguin later this year

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